a The Africa Annual feature by Jon Pienaar Nigeria as an investment destination has been ramped up to grab the world’s attention because of its huge increase in rebased GDP. But it’s going to take more than that to compete with South Africa for FDI.
So, Nigeria is ‘king of the castle,’ but that does not mean South Africa is the ‘dirty rascal.’ It seems unlikely that international businesses that have been planning to invest in South Africa, or that have already done so, would suddenly up-sticks and move their investments to Nigeria.
The West African country already attracts more FDI (Foreign Direct Investment) than any other country in Africa. Having a foothold in a country that is on the up and up, with excellent growth opportunities and a huge consumer base, does make good sense.
In fact, many South African companies have already set up shop in Nigeria: it is a great launching pad for incursions into other territories, like Kenya, Ghana, Uganda and Tanzania, and even into smaller countries like Equatorial Guinea and Cote d’Ivoire. Companies like Shoprite, SABMiller and Vodacom have learned the hard lessons from this exercise, but are generally reaping the rewards.
According to a 2013 report by FDI Intelligence, a company which provides insights into, and advice on, cross-border investment, South Africa invested in more new FDI projects in Africa than any other country in the world. And the number of South African projects in Africa has increased by over 500% in the past decade.
However, one has to wonder how much the decision to enter these territories had to do with GDP, and how much it had to do with other factors, such as market-size, competition, infrastructure, taxation and logistical issues.
Compared to Nigeria, South Africa has many advantages. Infrastructure is one. For anyone who has been stuck in one of Lagos’ 24-hour traffic jams, Jozi’s potholes are, by comparison, a minor inconvenience. South Africans can boast that at least most of the traffic lights work most of the time, and although Eskom goes through bad phases, at least you can depend on electricity supply most of the time. Yes, it is not quite at First World standards, but at least it is not a case of a generator on every balcony, as visitors from other African cities can attest.
Nigeria may have a bigger GDP, but SA is still the leader in terms of wealth per capita: about three times larger than that of Nigeria. South African regulatory institutions are the best on the continent, and its financial infrastructure, banks and financial markets, are considered the strongest.
Add to that the ICT infrastructure, an independent judiciary and a large labour force: SA can tick most of the boxes essential for foreign investment. Of course, crime and corruption are major issues, but these are not necessarily deal-breakers.
By all accounts, corruption is worse in Nigeria, and it doesn’t look like it’s going to improve for a while. Approximately US$20 billion in oil revenues were found to have gone missing last year, and when central bank governor, Lamido Sanusi, threatened to expose corruption and mismanagement by the NNPC, (Nigerian National Petroleum Corporation,) he was summarily dismissed. One imagines that money could have paved a few roads or helped to sort out the electricity grid, but clearly personal profit is the motive for those in power.
Far be it for this humble publication to tell a country how to run its affairs, but if Nigeria truly wants to compete with South Africa for DFI, it needs to clean up its act before it can truly claim to be number one, ‘the king of the castle.’
This feature first ran in The Africa Annual published by Ornico with MarkLives.com as its official media partner. Read or download the full magazine via Issuu.
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